I spoke with the New York Post on Monday about future paths in the war with Iran.
We started with the question everyone wants to know: how high will oil prices go?
As for how far oil could rise over the next few weeks, “there’s really no upper bound,” said Jeff Krimmel, founder of Krimmel Strategy Group and an energy expert.
“I would not be surprised if it hit $150,” he said. “It’s just a combination of the duration of military combat operations and then the intensity.”
Some highly-regarded analysts publicly dismissed $100 oil. Prices surpassed that level Sunday night.
The longer the Strait of Hormuz remains inaccessible, and the more production that gets shut in across the Middle East, the greater the likelihood of an even higher spike becomes.
❗ At one point, oil prices raced more than $40 per barrel above pre-war levels. That matters at the pump.
For every dollar increase in oil prices, there is typically a 4-cent increase in gasoline prices – meaning a $40 jump in crude could hike prices at the pump by $1.60, according to Krimmel.
That kind of energy cost shock redirects consumer spending, slows economic growth, and makes it harder for the Fed to cut rates.
That’s stagflation.
How does this compare to the 1970s oil embargo? There are some profoundly important differences.
The US also produces much more oil today than it did in the 1970s, and global economies have somewhat diversified away from fossil fuels, Krimmel said.
A quick price recovery is possible if military operations wrap up within the next couple of weeks.
But if combat drags out and the US is truly committed to regime change in Iran, that scenario becomes much harder to imagine.
G7 nations are exploring a potential release of crude reserves to blunt the market pain. But there are limits.
The relief would ultimately be short-lived, however, as there aren’t enough oil reserves in the world to make up for the complete blockade of the Middle East, according to Krimmel.
And then after my conversation, we heard the competing statements from President Trump that “the war is very complete, pretty much” and then later “we’re going to go further”.
The market is quickly gaining confidence that an end is near, with US oil prices now below $85 per barrel, around $30 lower than its highs on Sunday night.
As we’ve seen plenty of times over the past 10 days, we should exercise caution in extrapolating what’s happening right now into the future.
📌 Any of these market realities can flip entirely with one statement from the US president.
